STOCK MARKET WATCH, Friday 9 June

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Full article: http://news.bbc.co.uk/2/hi/business/5062632.stm

JD Power's quality ratings were released this week. How did the U.S. automakers do? Average-to-bad. The only thing going for Ford these days is the Ranger pickup. They still cannot seem to fix their crappy cooling systems.

Contrary to Past, Recent Market Behavior Suggests Weakness Should Be Sold

There is something important that seems to have changed in the stock market. The market has had a certain consistent character since the major large cap indices stopped strongly trending as of New Year's 2004. The market’s character has imparted a rhythm upon the stock market that has been profitably used by a many alert technicians who were buying pullbacks. The pullbacks have had similar sentiment internals, characterized by high put to call ratios, volatility spikes, bearish sentiment indicators, negative fundamental news, and oversold conditions. The rallies off of the pullbacks have been steep, making long positions profitable in a short amount of time. All the while, longer term market internals and momentum have been weakening. But the frequency and dependability of the periodic rallies always trumped these weakening market internals. Over an approximate 2-1/2 year time frame, it has been almost financial suicide for traders to sell into weakness and apparent breakdowns of technical support levels. This may have changed recently.

When the market swooned in mid-May, a couple of important characteristics seemed to have changed. The consistency of the drop which extended over 11 days was one important break with the recent past. Whereas previous pullbacks were generally slower and indecisive, the May swoon was sharp and impulsive. The market then began to rally 2 weeks ago off of an oversold condition – seemingly the perfect opportunity for the Bulls to go long for their typical bull rally. The market then tried to rally for 7 trading days, recovering almost 50 percent of the previous drop (in the S&P 500), and it appeared that, once again, it was time to don the rally hats for another market rescue followed by a rise to new multi-year highs.

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Last weekend, the public and fund managers had two days to digest the in-progress rally and contemplate whether to go long (or longer). Anxious shorts late to the swoon also had some time to decide whether they wanted to continue with the spanking they were (once again) getting. But come Monday (June 5th), after a strong open, the market closed down. On Tuesday (June 6th), following a strong opening, the market closed down. On Wednesday (June 7th), following a strong opening, the market closed down. Do you see a pattern developing? Strong opens with weak closes tends to suggest a weakening market. This contrasts what traders have become used to the last 2 years - “flagpole rallies” - where the market opens strong, bases or corrects in the late morning and early afternoon, and finally rallies at about 2pm Wall Street time into the close.

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The market is likely to be on an important turning point. The high volume referenced above was driven by HUGE trading volume in ETFs. The S&P, Nasdaq 100, and Dow Jones Industrial ETFs traded more 3 times the average daily volume! At the minimum, this will provide fodder for stock market conspiracy theorists perhaps suggesting that to prop the market, manipulators were on the buy side of the equations today. Then who was on the sell side?

http://www.financialsense.com/Market/wrapup.htm

http://business.guardian.co.uk/story/0,,1793613,00.html
Nils Pratley
Friday June 9, 2006
The Guardian

A failed rally, they say, represents a big red warning signal for the stock markets. It is what we've got now. Yesterday's 143-point fall in the FTSE 100 took the index back to within 30 points of the low point that was reached 12 trading days ago. The bulls have tried their best to generate some enthusiasm and have encountered fresh selling. You wouldn't bet too much against another attempt at a rally, but the sudden rise in volatility does not bode well.

David Schwartz, a stock market historian, calculated the other day that the FTSE All Share index had shifted up or down by more than 1% in 11 trading days out of 17. Yesterday that figure became 12 out of 19.

Looking back to 1970, he reckoned there was only one occasion, in 1985, when such a sudden patch of volatility had emerged in the middle of a long bull run in the UK market. The conclusion? Well, it's not a bull market any more.

Schwartz yesterday provided another of these seductive statistics. We've now had eight declines of 1% or more in 19 days. Going back to 1956 this time, he reckons a bear market was in progress 80% of the time.

Of course, if stock market investment was just a matter of looking at history and playing the odds, we might all be millionaires. The practice is infinitely harder. But these statistics on volatility do hint at a truth about markets: when they turn, they often turn violently.

/...

8:30 AM Export Prices ex-ag. May
Briefing Forecast NA
Market Expects NA
Prior 0.7%

8:30 AM Import Prices ex-oil May
Briefing Forecast NA
Market Expects NA
Prior 0.0%

8:30 AM Trade Balance Apr
Briefing Forecast -$65.5B
Market Expects -$65.0B
Prior -$62.0B

not counting yesterday as an up. We will get a real bounce today or a dead cat bounce?

:hi:

I think I'll have to flip a coin on that one :shrug:

Could go either way at this point - will the $1 billion under the estimated trade gap make a difference? hmmmm.... Seeing as how those numbers are constantly being revised each month, I don't think it's that big a "win".

8:30 AM ET 6/9/06 U.S. MAY NON-FUEL IMPORT PRICES RISE 0.7%

8:30 AM ET 6/9/06 U.S. MAY NON-PETROLEUM IMPORT PRICES RISE 0.6%

8:30 AM ET 6/9/06 U.S. MAY PETROLEUM IMPORT PRICES RISE 5.2%

8:30 AM ET 6/9/06 U.S. APRIL TRADE GAP WITH CHINA $17.0 BLN VS $14.8 YR AGO

8:30 AM ET 6/9/06 U.S. MAY IMPORT PRICES RISE 1.6% VS. 0.8% EXPECTED

8:30 AM ET 6/9/06 U.S. MARCH TRADE GAP REV $61.9 BLN VS $62.0 PREV EST

8:30 AM ET 6/9/06 U.S. APRIL TRADE GAP BELOW CONSENSUS OF $64.8 BLN

8:30 AM ET 6/9/06 U.S. APRIL TRADE GAP WIDENS 2.5% TO $63.4 BLN

Futures of tickers look like they are slightly up, is this false security or hopeful buying.


I think today will be very interesting come early afternoon.

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SINGAPORE (Reuters) - Oil slipped to $70 on Friday as traders assessed the potential for improved supplies from Iraq, reduced tension over Iran's nuclear program and signs of high energy costs slowing demand.

U.S. crude oil fell 35 cents to $70.00 a barrel by 0719 GMT, in a fourth day of losses that have taken the market down 3 percent this week. London Brent crude dropped 15 cents to $68.90 a barrel.

Prices have fallen after U.S. aircraft killed al Qaeda's leader in Iraq, Abu Musab al-Zarqawi, which Iraq's interior minister on Friday hailed as a "new beginning," raising some hope for an improvement in security.

Iraq's oil minister Hussain al-Shahristani told Reuters on Thursday that this will reduce violence and help improve Iraq's oil production, particularly in the north.

more

So much for hope as their plan.

BAGHDAD (Reuters) - Gunmen kidnapped a senior official of Iraq's oil ministry after he left work in Baghdad on Thursday, police and ministry sources said on Friday, highlighting the lawlessness still afflicting the vital sector.

The incident happened the same day U.S. troops killed Iraq's al Qaeda leader Abu Musab al-Zarqawi, whose demise the Iraqi Oil Minister Hussain al-Shahristani said would help improve the country's oil production, particularly in the north.

The sources said Muthana al-Badri, Director General of Iraq's State Company for Oil Projects (SCOP), was on his way home in the Sunni district of Adhamiya when gunmen in four cars stopped his car and abducted him but set his driver free.

They said the kidnappers have not contacted the ministry or Badri's family.

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mal-admin called for a "do over" now? For that matter, how many times have they killed this #2 guy? Who was he #2 to anyway? Oh yeah, Osama Bin Forgotten.

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060609:MTFH10746_2006-06-09_12-15-18_L09682182&type=comktNews&rpc=44

ISTANBUL, June 9 (Reuters) - Iraq needs up to $20 billion in investment to hoist production to 6 million barrels per day (bpd) and a new law designed to attract foreign cash will be approved this year, the country's oil minister said on Friday.

Iraq straddles the world's third largest oil reserves but the sector has been undermined by decades of underinvestment, war, sanctions and mismanagement.

"Iraq needs $12-20 billion of investment to raise oil production to six million barrels per day from two million now by 2012, which means $2-3 billion of investment a year," Hussain al-Shahristani told a Turkish-Arab economic conference.

Multinationals eyeing Iraq's giant and largely undeveloped oilfields are waiting until a new investment code with a legal and regulatory framework is in place before they venture in.

"We have given ourselves two months to draft the law and after that we definitely expect the parliament to pass it this year," Shahristani told Reuters on the sidelines of the conference.

/more...

http://english.eluniversal.com/2006/06/08/en_eco_art_08A719491.shtml

Oil company ExxonMobil hired a Suezmax tanker to return 500,000 barrels of synthetic extra-heavy oil Cerro Negro from Saint Lucia, in the Caribbean, to Jose terminal, in Venezuela, port operators said Thursday.

The Orion Voyager ship, with a capacity of 135,000 tons, will download the shipment on June 17-18, Reuters reported.

Cerro Negro is a partnership organized by ExxonMobil, BP Plc and state oil company Petróleos de Venezuela (Pdvsa), to upgrade extra-heavy oil in the Orinoco region and make it a lighter synthetic.

Exxon did not give the reason for the return.

http://www.themoscowtimes.com/stories/2006/06/09/042.html

Urals oil futures are now being traded on the RTS. Late Thursday, the July Urals contract was at $63.70 per barrel.

Urals oil futures began trading Thursday on the RTS, marking the first time the country's top blend has traded on an exchange.

The July Urals contract was trading at $63.70 per barrel Thursday evening, down from a high of $65.20 earlier in the day. More than $80 million changed hands in the July contract, according to the RTS web site. Each contract represents just 10 barrels of oil, which makes the futures appealing for small investors.

Besides the Urals futures, gold futures also started trading Thursday on the exchange. The price is based on the so-called London fixing, which is set every evening by the London Bullion Market Association.

Although the Urals prices are quoted in dollars, the contracts are settled in rubles according to the Central Bank's exchange rate. Investors cannot get delivery of any physical oil through the exchange -- all contracts are cancelled and settled in cash.

"Oil companies are not involved in this -- it's just a financial instrument," said Valery Nesterov, oil analyst at Troika Dialog. Nesterov said the contracts would provide "more opportunities to ensure market stability and hedge against price fluctuations."

In the future, the exchange will begin trading refined oil products, according to an RTS spokeswoman.

/more...

http://www.kommersant.com/page.asp?idr=528&id=680399

Russians and those who do business in Russia should be prepared for a more expensive ruble. The currency will be more easily convertible, but in exchange it will have a higher exchange rate, which will be a hardship for Russian producers. The establishment of raw materials exchanges to trade in exportable Russian resources will only make the situation more critical. Such are the conclusions of Evgeny Gavrilenko, chief economist and managing director of Troika Dialog investment company, in an article he wrote for Kommersant. An abridged version of that article appears below.

Russia's gold and currency reserves grew by $65 billion in the first four months of the year, and $40 billion of that was acquired in April and May. And that was in spite of a correction on the stock market in mid-May that resulted in a short exodus of capital from the country. The average monthly trade surplus in the first months of the year was about $12 billion. Taking into account the eternally negative balance on services, investment income and salaries, the surplus in current operations in the first five months of the year is about $50 billion. (The Central Bank only publishes quarterly figures on payment balances.)

Such significant growth in reserves can only be accounted for as a large-scale influx of capital, especially of capital onto financial markets and of loans. As a result, growth of the money mass has not only not slowed, it has even increased, since the influx of capital is not subject to sterilization the way petrodollars are in the stabilization fund.

When it forms its annual monetary policy, the Central Bank (and the administration) uses quite conservative prognoses of oil prices and, as a result, a conservative prognosis of the money mass. But it almost systematically turns out that oil prices exceed the prognoses and the influx of proceeds into the country's financial system exceed expectations and the Central Bank's reserves grow rapidly.

In its attempts to stem the growth of the money supply, besides sterilizing the money mass in the stabilization fund, the Central Bank raises the nominal exchange rate of the ruble. It has risen 2.2 percent in four months. With inflation slowing in recent months, the effect exchange rate of the ruble has risen 6.5 percent. Last year, the effective exchange rate of the ruble rose 10.5 percent and this year it will exceed that figure.

/more...

http://www.mosnews.com/money/2006/06/09/dollarshift.shtml

On Thursday, June 8, Russia became the latest in the list of countries that shifted a part of its Central Bank reserves from the dollar. Sergei Ignatyev, chairman of the Central Bank, said that only 50 percent of its reserves are now held in dollars, with 40 percent in euros and the rest in pounds sterling. Earlier it was believed that just 25-30 percent of Russia’s reserves were held in euros, with virtually all the rest held in dollars.

Russia’s gold and foreign currency reserves have grown rapidly over the last few years in tandem with high oil and gas prices. As MosNews has reported earlier, Russia currently has the world’s fourth-largest reserves, after China, Japan and Taiwan, and it looks to overcome Taiwan by the end of the year, with reserves growing by $5-6 billion monthly.

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Moscow’s move was unsurprising. Russia’s $71.5billion Stabilization fund, which accumulates windfall oil revenues, is due to be converted from rubles to 45 percent dollars, 45 percent euros and 10 percent sterling. The day-to-day movements of the ruble are monitored against a basket of 0.6 dollars and 0.4 euros. About 39 percent of Russia’s goods imports came from the eurozone in 2005, against just 4 percent from the US.

The statement plays into a perception that central banks, which together hold $4.25 trillion of reserves, are increasingly channeling fresh reserves away from the dollar to reduce potential losses if the dollar was to fall sharply.

/more...

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/06/09/woil09.xml&pPage=/core/Matt/pcMatt.jhtml

Washington scored a significant victory in its contest with Moscow for influence in Central Asia yesterday when Kazakhstan agreed to start pumping oil to the West through a British Petroleum pipeline that bypasses Russia and Iran.

The deal, secured largely because of a personal visit to Kazakhstan last month by Dick Cheney, the United States vice-president, will infuriate the Kremlin. But there will be secret relief in European capitals, where there is growing concern over Russia's apparent willingness to use its vast energy supplies as a political weapon.

Nursultan Nazarbayev, the Kazakh president, told an investors' conference in the capital, Almaty, that a formal agreement would be signed next week to begin delivery through an existing BP pipeline that connects Azerbaijan to the Turkish coast. This loops through Georgia, thus avoiding Russia to the north and Iran to the south.

The deal will give the West greater access to the vast oil fields of the Caspian Sea - estimated to hold the world's third-largest reserves - and ease its growing dependence on energy from Russia and the Middle East. America and Russia are locked in fierce competition for access to Central Asia's vast energy wealth.

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President Ilham Aliyev of Azerbaijan, the other major oil-producing country on the Caspian to sign an energy deal with the West, was recently entertained at the White House - though he too has been accused of cheating in an election last year.

The new deal could help to bring down world oil prices, another factor likely to upset Russia, whose energy-dependent economy could wobble if crude falls below $50 a barrel.

/more...

Doesn't below $50 a barrel sound rather unreal? I don't think Russia has anything to worry about on that accord, as the $ becomes worth less, it'll take more, not less of them to buy a barrel of oil.

European bourses recouped have of Thursday's deep losses as Wall Street rallied at the end a volatile session to close in positive territory, Asian bourses climbed around 1 per cent and the dollar remained near a one-month high against euro. Oil prices were also steady around $70 a barrel.

The FTSE Eurofirst 300 rose 1.5 per cent to 1,273.47 with the Xetra Dax in Frankfurt up 1.5 per cent to 5,463.10, the CAC-40 in Paris 1.5 per cent ahead at 4,755.79 and the FTSE 100 in London 1.3 per cent to the good at 5,635.1.

On Thursday, Wall Street ended flat after a session of exceptional volatility sparked by growing investor concern about the US economy and interest rates. A late afternoon bounce pulled stocks back from an aggressive sell-off that for several hours had the S&P in negative territory for the year.

At the close, the S&P 500 was up 0.1 per cent, or 1.78 points, to 1,257.93, while the Nasdaq Composite dropped 0.3 per cent, or 6.48 points, to 2,145.32 - at one point falling more than 10 per cent from its May high, the threshold many analysts believe constitutes a market correction. The Dow Jones Industrial Average was flat, up 7.92 points at 10,938.82. See more on Thursday's Wall Street

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done deal? The NAS momentarily dipped more than 10 percent from its May high and is calling "I'm all done now"? Oye :eyes:

http://investing.reuters.co.uk/investing/MarketReportArticle.aspx?type=eurMktRpt&storyID=2006-06-09T114515Z_01_L0953468_RTRIDST_0_MARKETS-EUROPE-STOCKS-UPDATE-2.XML&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=2
Fri Jun 9, 2006 12:45 PM BST

PARIS, June 9 (Reuters) - European shares rebounded on Friday as investors scooped up mining and construction stocks and other shares that have suffered from sharp losses in recent sessions as investors fretted about economic prospects.

Energy stocks such as BP (BP.L: Quote, Profile, Research) helped feed market gains as oil prices climbed towards $71 a barrel, with technology issues such as Nokia (NOK1V.HE: Quote, Profile, Research) also standing out after Texas Instruments (TXN.N: Quote, Profile, Research) raised its outlook for second-quarter earnings and revenue above market expectations on strong demand.

Interest rate worries, that pushed European equities into a 4.4 percent tailspin this week, slightly receded after European Central Bank President Jean-Claude Trichet gave no clear signal that the euro zone central bank's interest rate increase on Thursday would be followed by another any time soon. "We think that the ECB board still favours the scenario of sticking to a gradual tightening process, with a likely 25-basis-point (0.25 percentage points) move to be decided late August. This is rather good news as it limits any immediate upside risk to the euro," said Frederic Pretet, an analyst at Societe Generale.

By 1135 GMT the pan-European FTSEurofirst 300 index <.FTEU3> was 1.4 percent stronger at 1,272.5 points, but still in the red for the year so far. The European benchmark has now given back all of the gains notched up this year and is around 10 percent below its near five-year high of 1,407.5 points struck a month ago.

Around Europe, London's FTSE 100 <.FTSE> index and Frankfurt's DAX <.GDAXI> both added 1.4 percent, while Paris's CAC 40 <.FCHI> gained 1.6 percent and the Swiss Market Index <.SSMI> was up 1.1 percent in Zurich.

Basic producers <.SXPP> led the march up as investors flocked back into a sector that has dived 24 percent in the past month alone amid worries that higher borrowing costs on both sides of the Atlantic may smother economic growth and hurt demand for metals and steel.

/more...

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2006-06-09T154241Z_01_L09369477_RTRIDST_0_MARKETS-EUROPE-STOCKS-URGENT.XML

LONDON, June 9 (Reuters) - European shares bounced on Friday off their lowest levels since December 2005, as investors took advantage of the recent slide to snap up shares in resource, construction and technology shares.

The pan-European FTSEurofirst 300 index <.FTEU3> closed unofficially up 1.6 percent at 1,275.9 points, but down 2.8 percent for the week and flat on the year-to-date.

London's FTSE 100 <.FTSE> index closed up 92.3 points or 1.7 percent higher at 5,655.2, rallying after Thursday's 143-point fall, which sliced some 35 billion pounds off the value of the index.

Frankfurt's DAX <.GDAXI> added 1.5 percent, while Paris's CAC 40 <.FCHI> gained 1.8 percent.

Despite the day's bounce, market watchers warn the positive move could prove short-lived with more downside likely as interest rate and global growth concerns persist.

WASHINGTON - Consumer confidence in the economy rebounded over the month, suggesting that people are taking still-elevated gasoline prices and the specter of even higher borrowing costs in stride.

The RBC CASH Index, based on results from the international polling firm Ipsos, showed confidence snapped out of the doldrums and clocked in at 84.1 in early June. That was a big improvement from May's reading of 67.1, a seven-month low.

June's number marked a return to a more normal reading for the confidence barometer. A year ago, consumer confidence stood at 84.

"In spite of high energy costs and all the uncertainties around them, consumers are holding in there. It's still a decent economy," said Joel Naroff, president of Naroff Economic Advisors. "Consumers seem to be weathering a lot of storms out there."

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Although it's a "credit card" economy. Statistics show that the majority of Americans purchases are going on the credit card. How long until those credit cards are maxed out, what happens to the "decent economy" then? :shrug:

I've long wondered how long this can go on. There will be a mighty reckoning soon.

Gee, things are swell in OH

http://www.daytondailynews.com/localnews/content/localnews/daily/0609jobs.html

Region's jobs outlook is state's gloomiest
Through 2014, the employment growth in the Dayton area will lag behind the rest of the state.


By Ken McCall

Staff Writer

DAYTON | Job losses in the thousands are coming to the Dayton area this month, and a recent state report predicts that the region's job outlook will be the worst in the state through 2014.


The numbers are sobering for a region that is facing several waves of layoffs in the coming weeks and months. Montgomery County employment officials are now predicting more than 2,700 layoffs by the end of the month and 3,641 by the end of the year. If Delphi Corp., which has filed for bankruptcy, closes its five local plants, the region's layoff total could exceed 9,100 by the end of 2008, said Lucius Plant, work force development coordinator for the Montgomery County Job Center.



To make matters worse, Less said, Dayton lost about 2,900 jobs overall between 2004 and 2005. " To even start the long-term employment growth, you're going to have to recover what you lost," Less said.

In recent years, the Depository Trust & Clearing Corporation, the US's main platform for clearing and settling securities trades, has kept well out of the public eye.

For though the group is a veritable behemoth - it cleared an eye-popping $1.4quadrillion worth of securities last year - it has traditionally been so slow-moving that bankers often describe the institution as a utility.

But now this vast corporation, which is jointly owned by the leading US investment banks, is trying to shake off its shackles. For as the DTCC has watched its clients in the financial world move their focus away from exchange-traded equities and bonds to over-the-counter derivatives in recent years, it has realised that it needs to keep up.

More specifically, behind the scenes the group has been quietly plotting how to shift out of the unglamorous business of back-office equities and fixed income settlement into the more exciting front-office world of over-the-counter derivatives instead.

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holey moley, that's a lot of moolah!

dp

Remember: take this with a pinch of salt because these economists are of the constantly 'surprised' variety.

White House economists stuck to their guns on Thursday and forecast a soft landing for the US economy in spite of mounting market fears of inflation and slowing growth.

Releasing the administration’s twice-yearly update on the economy, Ed Lazear, the chairman of the council of economic advisers, said it did not expect higher-than-expected inflation in the first few months of this year to “cascade into future periods”.

He said there was no need to be alarmed by inflation expectations, saying they had stabilised at about 2.5 per cent and were “steady out to the distant future”. “All the indications we have seen are that we are moving to a soft landing,” he added, predicting that growth would remain robust and job creation would improve from recent depressed levels.

Mr Lazear said US trade data were moving “not only in the right direction but really at the right pace as well” and said he was relaxed about recent volatility in the dollar. “We see no reason to be alarmed by anything that is happening out there,” he said.

http://news.ft.com/cms/s/ee21b914-f73f-11da-a566-0000779e2340.html

morning. "We had no idea! But we take it to mean that we will have sunlight for at least a few hours today, so that's good news." :silly:

http://www.bloomberg.com/apps/news?pid=10000102&refer=uk&sid=aYfjODgcX6KM

June 9 (Bloomberg) -- The world's central bankers are likely to keep raising interest rates to snuff out faster inflation, undeterred by the turbulence their words and actions are having on global financial markets.

``They shouldn't be happy, but they have a job to do, which is keep their eye on inflation,'' said Harvard University Professor Martin Feldstein, once a candidate to succeed Alan Greenspan as Federal Reserve chairman, a job that went to Ben S. Bernanke.

<snip>

The ECB, Bank of Korea, Reserve Bank of India and South African Reserve Bank all raised rates yesterday, sending Asian stocks to the biggest slide in two years and pushing Europe's Dow Jones Stoxx 600 Index to its low for the year. Prices for zinc, copper and aluminum weakened, while bonds rose. The Dow Jones Industrial Average rose 0.1 percent yesterday after losing as much as 1.6 percent.

European and Asian stocks rebounded today and emerging markets equities rose as some investors said the sell-off was excessive.

``The contentious bit is the old one about whether central banks should pay particular attention to asset prices,'' said Christopher Allsopp, who teaches economics at Oxford University and is a former Bank of England policy maker. ``They take them into account and they react quickly, but they shouldn't divert from their overall remit of inflation-targeting.''

Bernanke Comments

Bernanke, who had been criticized for not tackling inflation aggressively enough, kicked the week off by telling a banking conference in Washington on June 5 that price increases were too fast for his comfort. Traders judged a quarter-point increase in the Fed's rate this month to 5.25 percent to be almost a done deal after the remarks. The Fed's tightening cycle, the longest in a generation, began in June 2004.

Avoiding `Blunders'

Central bankers are particularly keen not to let inflation expectations gather momentum. That's important because if companies and workers believe inflation is headed higher, their actions may help bring that result. Companies will raise prices, while workers will demand higher wages.

``The big policy blunders have been associated with the failure of central banks to keep inflation expectations under control,'' said Mark Gertler, head of New York University's economics department, who wrote a series of papers with Bernanke when the chairman was a professor at Princeton University. ``That is where the current Fed is coming from.''

/more academic stuff...

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 85.70 Change -0.16 (-0.19%)

Trade or Fade for the Dollar

http://www.dailyfx.com/story/dailyfx_reports/daily_brief/Trade_or_Fade_for_the_1149850998169.html

If yesterday was rate announcement day in FX, today’s theme is trade. Overnight both UK and German Trade Balances reported results, with UK figures showing surprising deterioration. The UK Trade Balance with non EU members expanded to -3.3B versus expectations of -2.8 Billion pounds. Surprisingly, trade in crude registered the biggest surplus since last March, with the increase in the trade deficit coming strictly from an ever widening gap between imports and exports for consumer goods and services. The news does not bode well for cable as the widening trade deficit will now weigh on UK growth going forward. The only positive dynamic for pound longs remains UK capital markets which continue to attract massive amount of M&A flow and have been the dominant driver of pound demand over the past several months.

German data was considerably better with Trade Balance printing at 11.2 Billion surplus- slightly lower than the 12.3 Billion forecast. Exports however far outpaced imports jumping 4.3% against a rise in imports of 2.3%. Yesterday, much to the chagrin of euro longs, ECB President Jean Paul Trichet masterfully orchestrated a lowering of the EUR/USD exchange rate by essentially promising nothing “ex-ante” to the markets leading many speculators to doubt ECB’s commitment to further rate hikes. We, however, believe the European monetary officials have lost none of their hawkish resolve, and having guided the EUR/USD to well below the 1.3000 level will now be free to exercise proper monetary restraint without the interference of EZ fiscal officials concerned about the threat to export growth.

Imports and exports will of course be fresh on the minds of traders today as the US Trade Balance deficit is due to report at 12:30 GMT today. The currency market consensus is for a widening of the gap to -$65 Billion. Although hardly positive, should the number meet expectations, it is unlikely to produce a major negative impact on the greenback. Only if it nears the psychologically troubling -$70 Billion level could the dollar feel pressure as all of the structural concerns about the deteriorating US Balance Sheet position return to the forefront. Of special interest will be the composition of the Trade Deficit itself. Namely, market players will want to know if the petroleum deficit expanded materially from the month prior. Should that be the case it may add an additional negative note to the tone of the report, since the primary exporters of crude from the Gulf region have been far more enthusiastic buyers of euros than the goods producing exporters such as China and Japan.

...more...

Tomorrow's Economic Releases: International Trade Balances To Shake Up FX

http://www.dailyfx.com/story/calendar/key_events/Tomorrow_s_Economic_Releases__International_Trade_1149794785818.html

US Trade Balance (APR) (12:30 GMT; 08:30 EST)



Consensus: -$65.0B

Previous: -$62.0B



Outlook: The trade deficit in the world’s largest economy is expected to have broadened to $65.0 billion over April. If realized, the level would be the fifth largest shortfall on record. Key to the expected worsening was record prices of oil for the month, which is likely to accelerate the pace of imports beyond that of sales of US products abroad. The cost of imported petroleum rose 11.5 percent during the month of April, the largest jump since March 2005. Overall import price are expected to print a 0.7 percent rise. Inversely, export prices look to have only risen only 0.3 percent for the same month however as the cheaper dollar slowly attracted foreign consumers to American products. After two months of surprise contractions, it is not particularly surprising that the deficit is back to its expansionary norm. In addition to pricing concerns, demand for energy products increased in anticipation of the high-demand, summer driving season. Domestically, consumer spending in April was supported by consumer confidence at its highest level since May of 2002, while retail sales rose 0.5% despite the additional costs. Although global economic growth is generating demand for exports, the US is growing at a faster pace than many of the other major economies and imports are effectively canceling gains in exports.



Previous: The United State’s sizable goods trade deficit narrowed unexpectedly for the second consecutive month to $62.0 billion in March. This marked the lowest balance deficit since August 2005. Leading the shortfall lower was the price of petroleum imports, which dropped along with the fall in oil prices during the month. However import prices overall showed a rise of 2.1 percent – the most in 7 months, while export prices only rose 0.6 percent. This conservative rise in prices was combined with a rise in export demand to a record level as global consumption mirrored the rise in the globe’s economy. Trade was also pushed along by a weakening dollar, making US products more attractive abroad. Further, helping to lower the deficit was a rise in exports to China. US companies shipped a record $5 billion to China, however imports from the country continued to rise, reaching $20.5 billion.

...more...

Everything But The Kitchen Sink Moves The Dollar Higher

http://www.dailyfx.com/story/dailyfx_financial_markets_headlines/Everything_But_The_Kitchen_Sink_1149782327099.html

The dollar plowed ahead for the fourth consecutive session Thursday as a taste of scheduled economic data was accented by other global irregularities that spelled gold for the greenback. Price action in the major crosses was almost incessantly dollar bullish. The benchmark EURUSD pair moved out of its 1.2700 – 1.2975 range as the dollar pressured the pair to a monthly low around 1.2625. Similar period records were marked against the British pound and Japanese Yen for through the session hours. By mid-morning the GBPUSD reached a 1.8370 low while USDJPY moved to a 114.80 high before taking a break. Also technically significant in price action was the Swiss denominated dollar pair. Strength in the US currency pushed the USDCHF beyond a well tested and long standing range resistance around 1.2300 before reaching a morning high 1.2370.

Somewhat worthy economic indicators were finally produced by the US in Thursday’s session with claims and wholesale data weighing in on the fundamental value of the dollar. Initial claims for the week ending June 3rd numbered 302,000, the lowest read since the final week of March. This measurement was taking with a grain of salt as it was primarily a result of the shortened week due to Memorial Day, even so the release bested expectations by a wide margin. The importance of these weekly employment figures should not be underestimated in the wake of last week’s disappointing NFP report. In other news, the wholesales sales and inventories outpaced expectations. Sales to firms farther down the supply chain accelerated 1.3% over the month of April despite higher input costs, while inventories rose 0.9% in anticipation of sustained demand. Outside of the strict confines of government-measured releases, the dollar received significant strength from the ECB’s monetary policy decision, falling commodity prices and the death of a notorious terrorist. In the hours before the open of US financial markets, President Trichet announced a 25 basis point interest rate hike with slightly more dovish commentary. The comments were well received by dollar bulls who are leery of the pace the Fed can keep up its interest rate hikes in relationship to other major economies. The basic valuation model for currency crosses is centered around the interest rate differentials between two currencies. Also catching the attention of morning traders was the death of Iraq’s most wanted terrorist Abu Musab al-Zarqawi. In response to the news, energy commodity prices, which have weighed heavily on the US currency fell. Tomorrow’s session center on the US trade deficit, which will be evaluated for its potential to make a trifecta of concern along with possible monetary policy stalling and stalling employment figures.

...more...

Last trade 85.87 Change +0.01 (+0.01%)

Settle Time 15:02 Open 85.87

Previous Close 85.86 High 86.06

Low 85.64

Last trade 85.60 Change -0.26 (-0.30%)

Settle Time 15:02 Open 85.87

Previous Close 85.86 High 86.06

Low 85.56

http://www.321gold.com/editorials/merk/merk060806.html

snip>

Most commentators believe that convincing Paulson to accept the nomination has been one of the best moves of the Administration. Is it enough to cure the deficits? Let us examine how Paulson could influence a couple of key parameters that put the dollar most at risk. We focus on the current account deficit, which amounted to over $800 billion, or about 7% of Gross Domestic Product (GDP) in 2005; foreigners need to finance the current account deficit by buying more than 2 billion dollars worth of US denominated assets every single day (please also see our recent discussion on The Current Account Deficit Matters). Key ways to alleviate the pressure on the current account deficit include increasing domestic savings, lowering domestic consumption, increasing foreign consumption or increasing foreign investments in the US.

Domestic savings: Paulson has favored tax cuts to stimulate the economy, but he also favors fiscal restraint. He may have been hired to increase pressure on Congress to cut spending to get the budget deficit under control. Unfortunately, as an unelected official, it is doubtful he can influence Congress run by voter-conscious politicians as much as he could influence "profit-conscious" traders and bankers. The "discretionary" budget is rather small, and depending on what your political persuasion is, you may think that many essential programs have already been cut to the bone. Paulson will likely be more successful in shaping spending policies than his predecessors, but we should not expect him to convince the Administration to drastically cut e.g. its military budget. Let us also not forget that the current Administration is more or less a lame duck already; it is difficult to envision radical reforms. If nothing else, he might be able to convince the Administration - which has never vetoed a bill - to veto an over-bloated budget. Also, Paulson is known as an environmentalist and might be able to convince the Administration that "green" policies can be good for business.

Promoting lower consumption as a way to reduce the current account deficit has never been popular in Washington as it seems political suicide. However, unless accompanied by higher real income, higher savings tend to be directly accompanied with lower consumption (or lower government spending). The Federal Reserve has a bigger role to play in reigning in consumption by tightening available credit; this is a separate discussion we have held; we will update it in due course based on recent comments from Fed officials, but it goes beyond an analysis of Paulson's ability to save the dollar from falling further.

Increasing foreign consumption. If foreigners only were to spend more, our current account deficit wouldn't be so huge. There are signs that indeed both Europe and Asia is spending more, but will it be enough given the huge imbalances? And more importantly, what will Asian consumers buy exported from the United States as they increase their appetite? Even a lower dollar will not resurrect our manufacturing industry. Having said that, Paulson can make a real difference when it comes to trade. Paulson has traveled to China over 70 times; he is known and respected throughout the world. We have been rather concerned that increased protectionist sentiment will make the adjustment process for the dollar more painful as it would punish those businesses that have been able to adopt. Paulson might finally be a politician who can communicate the pros and cons of globalization; he can contribute a great deal to have politicians at home and abroad understand the real issues, so that populist ideas might be held at bay. Whether he succeeds remains to be seen, but this is an area where he can make a true difference. As far as the dollar is concerned, rising protectionism is a major risk because of our dependence on foreigners to buy over 2 billion dollars worth of US dollar denominated assets every single day, just to keep the dollar from falling. Many ill-designed policies in recent years have lead to a disillusioned public that is working harder than ever while making less in real terms; it is all too easy to blame China and other emerging countries for the challenges we face. We need someone who can apply pressure abroad where pressure is due; but we also need someone to apply pressure at home to strike a balance.

Should it come to a crisis in the derivatives markets, Paulson knows these markets and industry participants well. While we doubt Paulson may be able to reverse the trend of the falling dollar, he can contribute to make its decline orderly.

more...

http://www.nytimes.com/2006/06/09/business/worldbusiness/09steel.html?ex=1307505600&en=a73c2534f08e33d0&ei=5088&partner=rssnyt&emc=rss

(free registration or try www.bugmenot.com)

LONDON, June 8 — Mittal Steel has an ally in its fight to take over Arcelor — the former United States attorney general, John Ashcroft.

Mr. Ashcroft, a conservative Republican, set up the Ashcroft Group, a well-connected lobbying firm, after he left the Bush administration at the beginning of 2005.

<snip>

At issue, he said, is the way that Arcelor is trying to block Mittal's takeover with a 13 billion euro deal ($16.7 billion) that it struck with the Russian steel company Severstal.

Arcelor, based in Luxembourg, may need antitrust clearance from the United States Department of Justice for the Severstal deal, which is structured as an exchange of equity stakes. If that is the case, Mr. Ashcroft's role may be clearer: his contacts in the Justice Department, which clears takeovers, are said to be formidable.

"The process that has been embraced by Arcelor cannot be said to welcome democracy," Mr. Ashcroft said in a telephone interview Thursday night. The company's actions cause "serious questions to be raised" about management's commitment to corporate governance.

...more...

Courtesy of a reader over at George Ure's Urban Survival, in the Free Business News Update section.
http://urbansurvival.com/week.htm


Russian "Search Gap"

OK, this is one of the most interesting emails in quite a while - check this one out:

George,

Thought you'd like the comparison of net search trends for US vs Russia on Google:

America: Gaining Search Queries: Week Ending June 5, 2006

1. the omen 2. french open 3. father's day 4. katie couric 5. jaleel white 6. anna nicole smith 7. michelle wie 8. sarah silverman 9. criss angel 10. pirate bay 11. AFI 12. ncaa baseball 13. miami heat 14. maria sharapova 15. spelling bee

(Yeah, usual entertainment BS)

Russia - Popular Queries: April 2006 (last available) 1. Íîóòáóêè â êðåäèò (Credit line for laptops) 2. Ïàñõà (Easter) 3. Íå ðîäèñü êðàñèâîé (Name of the TV show) 4. Øâåéöàðñêèå ÷àñû (Swiss watches) 5. Êàê îòêðûòü ñ÷åò â å -gold (How to open e-gold account) 6. Ñèñòåìà î÷èñòêè âîäû (Water filtration system) 7. òäûõ â ïîäìîñêîâüå (Vacation near Moscow) 8. Âåòðÿíàÿ îñïà (Smallpox) 9. Ìîþùèé ïûëåñîñ (Carpet cleaner) 10. Ñâàäüáà (Wedding) 11. ×åðíîáûëü (Chernobyl) 12. Êàðòà ìèðà (Map of the world) 13. 1 ìàÿ (May 1) 14. Òóðû â Èòàëèþ (Tours to Italy) 15. Áàíÿ (Sauna)

Hmmm, online banking, e-gold, swiss watches, smallpox, and water filtration? What do the Russians know that most Americans don't?!

Lots!

The US leads in computer owners and that those who can afford it in Russia do it for business and practicalities? In fact I might wager this IS a good insight into the Russian business mind while our search engines are inundated by popular culture. When you have the whole world tuned in for Katie Couric's hair-do then a lot of useful information will be buried. One might feel the universal despair you are supposed to feel for the corporate controlled bread and circuses virtual future.

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=urn:newsml:reuters.com:20060609:MTFH08119_2006-06-09_10-28-47_L09648501&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=HybArt-C1-ArticlePage2

PARIS, June 9 (Reuters) - The economic outlook has improved in most of the Group of Seven leading industrial nations but has weakened in Canada and the United States, according to an early warning indicator issued on Friday by the OECD. For the first time, the Paris-based Organisation for Economic Cooperation added Brazil, China, India and Russia to the data, as part of an effort to better reflect the weight of fast growing economies in the world.

"April data showed improved performance...in the euro area, United Kingdom and Japan, but slightly weakening performance in Canada and the United States," the OECD said. "The latest data for major OECD non-member economies point to continued strong expansion in China and moderate expansion in India."

The leading indicator for the G7 area rose to 105.4 in April from 105.2 in March.

The United States, the world's largest economy, fell to 106.9 from 107.0 while the indicator for neighbouring Canada dropped to 101.6 from 102.2. Analysts are expecting growth in the coming quarters to level off in the United States as rising interest rates bite.

The indicator for Britain rose to 101.4 from 101.2 and to 102.0 from 101.3 in Japan. Japan's economic growth slowed to an annualised pace of 1.9 percent in the first three months of the year from 4.3 percent in the previous quarter. But based on a Japanese finance ministry survey this week showing strong capital spending during the quarter, economists expect revised GDP data due on Monday to show annualised growth at 3.2 percent.

The leading indicator for the 30-nation OECD area rose to 110.1 in April from 109.6 the previous month.

The indicator for China soared 3.1 points in April to 219.1. For Russia it climbed to 139.0 from 137.9 in March.

/more...

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060609:MTFH15611_2006-06-09_15-07-42_L09589028&type=comktNews&rpc=44

Five Reuters pages summarizing what these people had to say yesterday, including for example:

ERKKI LIIKANEN, BANK OF FINLAND GOVERNOR

- FINANCIAL STABILITY: "For us, the challenge is how to focus on the issues where a crisis might come. We don't want to start to speculate, but we all know (about) the historically low interest rates that we have mentioned in the last days, a lot of liquidity -- and there have been unbelievable things from private equity funds at the moment, highly-leveraged. Hedge funds we see mentioned everywhere."

AXEL WEBER, BUNDESBANK PRESIDENT

- U.S. CURRENT ACCOUNT DEFICIT: "I'm of the view that it is quite unsustainable and therefore if something cannot go on forever then it would stop -- and will it stop in an orderly or a disorderly fashion?"

"At 6.5 percent current account deficit and 5 percent nominal GDP growth, (this would) lead to ....the accumulation of a net debtor position that is very, very high, and that would imply an even greater part of U.S. capital stock being foreign-held. And for me this raises the clear question as to whether this is politically acceptable."

- RESOLVING GLOBAL IMBALANCES: "Currently, in terms of potential action, we are in a very favourable international setting. There is some clear understanding that this is a multinational problem, and multinational action is warranted, it's a common call on everybody to pull the levers they have at their disposal."

/plenty more...

it has anything to do with the Conservative Wackos in charge, ey?

peak on the DJIA is looking less pronounced.

Is the DJIA loosing some of it's upward steam? - I think so, but the afternoon hours will tell us if this is beginning of a down day.

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2006-06-09T134854Z_01_N094547_RTRIDST_0_MARKETS-BRAZIL.XML
Fri Jun 9, 2006 9:49am ET

SAO PAULO, Brazil, June 9 (Reuters) - Brazil's currency and stocks rose on Friday as international equities markets, seen as a gauge of risk perception, gained in trading that was relatively orderly after the previous session's volatility.

The Bovespa index <.BVSP> of the Sao Paulo Stock Exchange gained 2.01 percent early to 36,149 points, while the real <BRBY> strengthened 1.06 percent to 2.248 per U.S. dollar.

Oil driller Petrobras (PETR4.SA: Quote, Profile, Research), the heaviest-weighted stock in the index, jumped 2.13 percent to 41.15 reais.

Lifting local asset prices was a 12 basis points drop, to 258, in yield spreads between Brazil's sovereign bonds and comparable U.S. Treasuries, according to J.P. Morgan's EMBI+ index <11EMJ>, which tracks interest rate premiums developing countries would pay to borrow on global markets.

<snip>

Despite the positive overseas tone, Brazilian markets have been volatile for much of the past three weeks. This week they slipped on hawkish comments made Monday by Fed Chairman Ben Bernanke, who warned the Fed must be vigilant to make sure U.S. inflation remains under control even if economic growth slows.

Many investors around the globe saw the comments as a sign that the Fed might continue raising interest rates, which could draw capital away from emerging markets like Brazil.

/more...

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2006-06-09T141357Z_01_N09316638_RTRIDST_0_MARKETS-MEXICO-URGENT.XML
Fri Jun 9, 2006 10:14am ET

MEXICO CITY, June 9 (Reuters) - Mexican stocks <.MXX> rose more than 1 percent on Friday as investors snapped up bargains after a week of heavy losses provoked by fears that U.S. interest rates could rise further.

Mexico's peso currency <MEX01> also strengthened 0.25 percent to 11.38 per dollar after weakening to 11.4080 per dollar on Thursday, its weakest close since January 2005.

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2006-06-09T140942Z_01_N09386396_RTRIDST_0_MARKETS-CANADA-STOCKS.XML
Fri Jun 9, 2006 10:10am ET

TORONTO, June 9 (Reuters) - The Toronto Stock Exchange's main index was up more than 30 points at the start of the session on Friday as investors returned cautiously to the market following steep losses in the previous session, while seeking some comfort in better-than-expected jobs numbers.

The Toronto Stock Exchange's S&P/TSX composite index <.GSPTSE> was up 35.17 points, or 0.3 percent, at 11,450.69 after touching as high as 11,490.00 earlier in the session.

This followed a loss of 59.9 points in the previous session. At one point on Thursday the index was down more than 312 points.

Eight of the TSX index's 10 main groups were higher, led by a 0.3 percent boost from the energy group and a 0.4 percent climb in the materials group. Technology shares were up 0.7 percent.

<snip>

Investors were also encouraged by strong employment numbers that showed Canada's economy added 96,700 jobs in May -- more than six times the number expected by analysts -- and pushed the unemployment rate down to a 31-year low of 6.1 percent.

/bit more...

Isn't it more than just flat? It's actually inverted at the 2-Year & 10-Year level. It's not fully inverted, but it's more than just flat. It's been pretty flat for the last few months, at the moment, it's actually inverted.

12:16
Dow 10,920.89 -17.93 (-0.16%)
Nasdaq 2,148.13 +2.81 (+0.13%)
S&P 500 1,255.98 -1.95 (-0.16%)
10-Yr Bond 49.75 -0.17 (-0.34%)
NYSE Volume 1,070,173,000
Nasdaq Volume 856,300,000

12:00 pm : The stock market has spent the majority of its time in positive territory today, supported by a sense that yesterday's recovery from steep losses is a signal that a short-term bottom has been put in place. Other helpful factors have included the healthy showing from foreign markets, most of which were up at least 1.0%, and a reassuring mid-quarter update from Texas Instruments (TXN 29.85, -0.87) that has prompted some bargain hunting interest in the beaten-down semiconductor space.

All things considered, though, it is clear that investors are still showing a sense of reserve as the major indices haven't ventured too far from the unchanged mark. The Nasdaq was an exception earlier in the session when it posted a gain of nearly 18 points, but as one can now see, the bulk of that gain has been erased. The recognition that Texas Instruments is actually trading down after raising its scond quarter sales and EPS guidance also speaks to the sense of reserve, as it is a reflection of the market's underlying concerns about earnings prospects in the back half of the year.

Sector leadership at this point is mixed with five of the ten economic sectors trading up and five trading down. Strikingly, the best performing area (Utilities) is up 0.39% while the worst-performing (Industrials and Health Care) are down 0.39%.

It is worth noting that selling efforts have picked up a bit in the past half hour, but even so, advancers still hold a sizable lead over decliners at the NYSE and Nasdaq.

After yesterday's slide in response to news of al-Zarqawi's killing, oil prices have rebounded and are presently up $0.82 at $71.95 per barrel. Bond prices are little changed and the dollar is down against the yen and the euro. Before the open, it was reported that the U.S. Trade Deficit widened to $63.4 billion in April versus $61.9 billion in March. That report was better than the market's $65 billion estimate, but it has had little impact on trading as participants eagerly await next week's PPI and CPI data. DJ30 -18.81 NASDAQ +2.81 SP500 -2.55 NASDAQ Dec/Adv/Vol 1146/1661/808 mln NYSE Dec/Adv/Vol 1112/1950/714 mln

Prices of goods imported into the U.S. rose 1.6% in May as the price of imported petroleum climbed for a third month, the Labor Department said. Excluding the rise in petroleum prices, import prices rose 0.6%, the biggest increase since October 2005.

Excluding all fuels, import prices rose 0.7%. It was the largest increase since the department began the import price index in January 2002. The rise in import prices beat forecasts. Economists surveyed by MarketWatch expected import prices to rise 0.8% in May. See full story.

CPI/PPI coming next week.

http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=55335

snip>

A recent national survey of homeowners by the L.A. Times shows 'widespread faith in the real estate market.' The worst possible scenario, that prices would 'stay the same' over the next three years, was selected by just 5 percent of homeowners. That total was less than the 6 percent who said they expect to see a rise of 31 percent or more. No matter how much talk of a bubble there may be, homeowners continue to demonstrate that they have no clue about the ramifications of one. And this is in an environment in which prices actually are falling! The denial runs so deep, it's not even denial anymore. It's some kind of epic disconnect between the reality of a newly falling housing market and an unwritten social contract that says home prices do not fall.

snip>

That brings us to the big "What if?" What if that investment house or condo you bought doesn't sell? Plan B is usually to rent it, but what if you can't find renters? Do you just hold on and keep paying the mortgage and other carrying costs, or do you throw the towel in and sell at a loss to whomever will buy?

The real problem is that markets can move much slower than we expect, which makes it all the more difficult to decide what to do. For reference, historian John Brooks wrote about how it felt to live during the Great Depression . In one word, it was "surreal." Keep in mind his description of the 1929-1933 experience:

It came with a kind of surrealistic slowness … so gradually that, on the one hand, it was possible to live through a good part of it without realizing that it was happening, and, on the other hand, it was possible to believe one had experienced and survived it when in fact it had no more than just begun.

When a market starts to turn, it doesn't have to be quick. It's more likely to be slow and painful – like boiling a frog. (The idea goes that a frog would jump out if it were thrown into a pot of boiling water. But if it's put into a pot of cold water and then the heat is turned on, the frog could not judge the threat.) In fact, economist Gary Shilling wrote in Forbes magazine last September, "History also suggests that a housing boom does not have to end violently. The Federal Deposit Insurance Corp. counted 63 home-price run-ups in various cities over the last 30 years, but so far just nine of these ended in busts, and all of those were regional." He goes on to point out that prices that went up gradually tend to come down gradually over many years. That means slow housing market busts can slowly boil investors who don't have the cash flow to hold onto their properties until the market turns again.

more...

cooked frog entree in OH.

Dayton Metropolitan Statistical Area — which now is comprised of Montgomery, Miami, Greene and Preble counties — will grow by (only)6.3 percent or 27,400 jobs from 2004 to 2014.

Can't pay mortgages without jobs! Can't pay rent without jobs!

Froggie appendages for appetizers, anyone, before the main course? - There's new schools (poor, though improving test scores), convenience shopping (once redevelopment {spelled WalMart} is complete, seven churches at every intersection (for supply-side Jeebus freaks), great sport teams (if you can stomach all the brewsky ads on the telly/cable/dish) cause locals will have a harder time spectating in person, for sure - Yay, no blackouts.

I hear you because it's frying my brain, for sure...Hold on or run like hell!

I want my ruby slippers so I can click heels together three times - there's no place like home, there's no place like home.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BBD4AA378%2D3E2C%2D464B%2D96E5%2DDFB826300739%7D&siteid=mktw&dist=




Hunh?

This month's decline may just portend a correction -- or a much sharper drop-off.
May 28, 2006

http://www.latimes.com/business/la-fi-petruno28may28,1,623220.column?coll=la-utilities-business

Can you afford a bear market?

Millions of investors wish they would have asked themselves that question seven years ago, before 2000-02 brought the worst decline in share prices since the 1930s.

Given the speed with which some stocks and mutual funds have dropped in recent weeks amid worries over interest rates and the economy, the market is forcing the issue again: How much pain can you endure?

Would your retirement or other life plans be threatened if your nest egg temporarily lost, say, 40% of its value? What about 20%?

With portfolio losses, the math can be killer. A drop of 30% requires a rebound of 43% on your principal just to get back to even. Give up 50% and you'd need a 100% gain to restore what you had before.

more....



How low will stocks go?
Once we're past the next Fed meeting, and into earnings season, we'll know how deep the correction cuts.
http://money.cnn.com/2006/06/08/markets/pluggedin_fortune/index.htm

NEW YORK (FORTUNE) - Everyone on Wall Street is asking the same question, from hedge fund managers who piled into once-hard-charging plays like mining stocks, commodities and crude oil to technical analysts who study each wobble in the indexes to predict the market's next move. Have we reached the bottom?

Although the drop, which began last month, has only taken the S&P 500 down about 5 percent, the fact that the overall market hasn't experienced a 10 percent correction in more than three years has left many investors more shaken up than usual.

snip>

Like other technical experts, Newton uses tools like past highs and lows, advance-decline ratios and support levels to predict the direction of the market. Going into Thursday's trading day, he saw a key level for the S&P 500 of 1245 (the May low for the S&P), which the market dipped below less than three hours into the trading day.

The next stop down, he says, is 1230. "If we get below there, that will cause a real deterioration in the technical structure," he says.

In terms of the Dow, he sees key short-term support levels at 10,735 and 10,684. "It really needs to hold where it is now and stay above 10,500 - that's the trend line support from the lows in October of 2004."

snip>

"It's a correction, not a bear market," adds veteran market strategist Byron Wien of Pequot Capital. "I don't think we're quite at a bottom but we're getting close."

more...

is that the "bull run" since October 2002 was just a bear market correction. The bear market resumes now. Fasten your seat belts please. :)

"It has been easy for investors to simply stay on autopilot for the last three years. One reason why the latest stock sell-off may have seemed shocking is that broad market pullbacks have been so rare in this bull run, which began in October 2002."

all of the "Bulls" coming into to "try" and push the market up.

they just don't get it, they just don't see the writing on the wall.

It's OK because the more they throw money into the fire the more a stoke my fire(ie Put plays)

Talk about pissing into the wind.

by the inflation worries. This bear market will be around for 2-4 months.

I think the market is undervalued, but i do believe it may go even more undervalued over the next few months.

we will have AWESOME buy points, I am very limited in my experience in trading, but one thing that works will for me is to not fight the market. In other words I do what the technicals tell me to do in the short term, but if I had the patience for long term investing I would ignore the technicals(noise) and focus on the fundamentals(PE's and PEG's, ROE's, Debt to Equities past Rev's, EPS's) ect....



I trade instead of holding, meaning I buy and sell almost everyday - I don't hold for the long term because if I buy and sell correctly within the market's trend(down right now - DJIA just had a Head and Shoulders) then over the long term my trading has big gains.

Sounds like you have got it down. I purchase (i don't use the word trade) based on the long term. Buy sound where i see value, and hold.

My strategy is less risky, but i also do not receive the reward you are able to garner.

I always try to have a 3:1 ratio of reward over risk, but I never ever get into a "purchase"(I like that) without 1st knowing where my uncle point is on my risk, In other words I know how much I want to lose before I call it quits on a "purchase", or worse get married to a trade because it goes back wards on me and I didn't unload it for the pre-determined loss and now I have too much of a loss in it and have to "wait" for it to come back if it does at all.

Now to make it even more tricky - I "purchase" nothing but in the money options both Calls and Puts with at least 4++ weeks of time before they expire just like everything else is traded in the market. I trade these ITM options for 10 minutes to 10 days and then I am out. So with the "time" factor always against me - it is never in my best interest to get stuck in a trade for a loss and try to wait for it to come back.

Cheers, I love this thread so many people have so many different angles and details to share.

Maybe a typo. :)

If you're right, that would make this a bull market correction, but I think it's a bear market resumption. I just think there are too many things wrong in the economy, the national and personal debt in particular. Home equity has been tapped and the overvaluation of the housing market will dampen that contribution to the economy. Rising interest rates will be the final prick to pop the equity bubble.

at this point - either way if the market goes down or up I am on solid footing with my trading, all I need is for the market to move, which is usually does.

2-4 years hmmm people are going to be hurting big time

Cheers and thanks for the reality ;)

or even to stage a mini-recovery in, that equity bubble right before the November elections?

But there are limits. Most of the tricks have been played already like lowering rates, deficit spending for our war economy. Now it's time to pay for the wild spending party. I think any recovery that can be waged at election time will be short lived. I think by election 2008 we'll be in the grips of a major bear market. Good for the Democrats, but they'll have to know what to do with such an inherited mess. JMHO. :)

too many times we try to equate the stock market to politics. I think that is a mistake, as the guys on wall st, and in board rooms across the country are concerned with making money, not political points.

People aren't going to make the wrong personal financial decisions just to make one party look good.

Valuations in the 2000 period were up to three times as bad as they are now. Now valuations are actually at the low end of historical ranges at just 15x forward earnings and only 17x trailing.

Consumer spending fueled by 0% rates and home equity refinancing have kept the economy alive since 2002. With that drying up, what will it do to the economy? Consumer spending is 2/3 of GDP.

A one or two percent decline in consumer spending on a nominal basis is considered to be nearly apocalyptic in economic circles, but that wouldn't destroy earnings. Even a worst case scenario, which would be a period like 1978 to 1982 for the consumer, and that was one of the worst stretches for our economy ever, earnings would likely only decline modestly.

Quite simply put, the market does not have massive downside risk based on fundamentals, so this is nothing like 2000 when I could justify the S&P 500 dropping 40% to get it back in line. I think the worst we are looking at right now is an additional 15% in a worst case scenario(Fed raising rates to 6%, housing market collapsing, energy prices remaining high), excluding an invasion of Iran.

http://www.hussmanfunds.com/wmc/wmc060605.htm

In recent months, I've emphasized that stocks are far more richly valued than price/earnings ratios seem to imply. The robust earnings growth rates of recent years largely reflected a trough-to-peak move in earnings, right back up to the 6% growth channel that connects S&P 500 earnings from economic peak-to-peak as far back as one cares to look (see the March 20, 2006 comment for a recent chart). With the exception of the late-1990's bubble, if we examine periods where earnings were within 10% of that long-term growth line, the price to peak earnings multiple on the S&P 500 has averaged less than 10. Moreover, once earnings approach that long-term trend line, they have typically contracted at an average rate of -3.39% annually over the subsequent 3-year period.

If investors ignore the position of earnings in the economic cycle, P/E ratios seem benign – certainly not extreme in comparison with the late-1990's bubble valuations. And it's a small step from there to argue that valuations are even bullish. If you watch the financial channels for more than about 20 minutes, you'll typically hear some analyst saying that “stocks are still cheap relative to bonds” – which is analyst-speak for the “Fed Model.” The Fed Model simply compares the earnings yield of the S&P 500 (based on estimates of future operating earnings) to the 10-year Treasury yield. If the earnings yield is higher, the Fed Model is bullish. Suffice it to say that the model has virtually zero predictive value for subsequent stock returns. However, I found several years ago that the model does have some slight redeeming value. It turns out that when earnings yields are low, and Treasury bond yields are even lower, it's not a useful buy signal for stocks, but it's often a pretty good sell signal on bonds.

Why worry about earnings?

There's a clear historical tendency for earnings to drop over the 3-years following an approach of that long-term 6% growth channel. But it would seem almost superstitious to believe that earnings ought to weaken this time around on that basis alone, especially with the economy still seemingly resilient. As always, the difference between analysis and superstition is in asking why a particular relationship should exist, and in understanding the mechanism behind it.

With that in mind, we put together the following chart last week (thanks to Bill Hester for research assistance). The blue line (right scale) depicts U.S. corporate profits as a percentage of nominal GDP. The violet line (left scale, smoothed) depicts U.S. personal disposable income as a percentage of nominal GDP, using an inverted scale – a rising line means a falling disposable income share. Notice that increasing corporate profits as a share of GDP generally come at the expense of wage earners' share, and vice versa. The recent upleg in corporate profits since 2003 reflects a corresponding drop in personal income as a share of GDP (a rising violet line) from 75% to 72% of GDP.

more...

http://www.msnbc.msn.com/id/13123358/site/newsweek/

snip>

Well, Americans have replaced Britons atop the world, and we are now worried that history is happening to us. History has arrived in the form of "Three Billion New Capitalists," as Clyde Prestowitz's recent book puts it, people from countries like China, India and the former Soviet Union, which all once scorned the global market economy but are now enthusiastic and increasingly sophisticated participants in it. They are poorer, hungrier and in some cases well trained, and will inevitably compete with Americans and America for a slice of the pie. A Goldman Sachs study concludes that by 2045, China will be the largest economy in the world, replacing the United States.

It is not just writers like Prestowitz who are sounding alarms. Jeffrey Immelt, CEO of GE, reflects on the growing competence and cost advantage of countries like China and even Mexico and says, "It's unclear how many manufacturers will choose to keep their businesses in the United States." Intel's Andy Grove is more blunt. "America ... down the tubes," he says, "and the worst part is nobody knows it. They're all in denial, patting themselves on the back, as the Titanic heads for the iceberg full speed ahead."

Much of the concern centers on the erosion of science and technology in the U.S., particularly in education. Eight months ago, the national academies of sciences, engineering and medicine came together to put out a report that argued that the "scientific and technical building blocks of our economic leadership are eroding at a time when many nations are gathering strength." President Bush has also jumped onto the competitiveness issue and recently proposed increases in funding certain science programs. (He has not, however, reversed a steady decline in funding for biomedical sciences.) Some speak of these new challenges with an air of fatalism. The national academies' report points out that China and India combined graduate 950,000 engineers every year, compared with 70,000 in America; that for the cost of one chemist or engineer in the U.S. a company could hire five chemists in China or 11 engineers in India; that of the 120 $1 billion-plus chemical plants being built around the world one is in the United States and 50 are in China.

There are some who see the decline of science and technology as part of a larger cultural decay. A country that once adhered to a Puritan ethic of delayed gratification has become one that revels in instant pleasures. We're losing interest in the basics—math, manufacturing, hard work, savings—and becoming a postindustrial society that specializes in consumption and leisure. "More people will graduate in the United States in 2006 with sports-exercise degrees than electrical-engineering degrees," says Immelt. "So, if we want to be the massage capital of the world, we're well on our way."

snip>

America's problem right now is that it is not really that scared. There is an intelligent debate about these issues among corporate executives, writers and the thin sliver of the public than is informed on these issues. But mainstream America is still unconcerned. Partly this is because these trends are operating at an early stage and somewhat under the surface. Americans do not really know how fast the rest of the world is catching up. We don't quite believe that most of the industrialized world—and a good part of the nonindustrialized world as well—has better cell-phone systems than we do. We would be horrified to learn that many have better and cheaper broadband—even France. We are told by our politicians that we have the best health-care system in the world, despite strong evidence to the contrary. We ignore the fact that a third of our public schools are totally dysfunctional because it doesn't affect our children. We boast that our capital markets are the world's finest even though of the 25 largest stock offerings (IPOs) made last year, only one was held in America. It is not an exaggeration to say that over the past five years, because of bad American policies, London is replacing New York as the world's financial capital.

more...

http://www.dailyreckoning.co.uk/article/080620062.html

snip>

And now the papers are blaming poor Ben Bernanke. The new man on the job at the Fed let it be known that inflation was ‘unwelcome.’ This is widely described as ‘tough talk,’ though to us it seems rather gentlemanly.
It is also, of course, a bald-faced lie. What would really be unwelcome is the absence of the inflation, the lack of increases in consumer prices, the sudden stiffening of the usually pliant US dollar. The Japanese lived through such an era for the last 10 years – with Ben Bernanke watching. Fed chiefs would sooner poke their own eyes out than have to watch it here in the US.
For they know as well as anyone, the Japanese could afford it; Americans cannot. Americans are too deep in debt. They need inflation. It keeps the cash coming to pay interest while lightening the debt load, little by little, over time.

No, there’s no real danger of Ben Bernanke suddenly becoming Paul Volcker. Even with lifts in his shoes he lacks the stature. And he’s 30 years too late. Volcker could turn off the money taps in the late ‘70s, because America was still a healthy economy back then. It could take a little dry weather. Three decades later, his successor, plucked from Princeton’s towers like a sprig of ivy, will wilt quickly.

That is why the ‘worldwide sell-off’ is likely to have very different results for the bond, the dollar, and stocks on the one hand, and commodities, selected emerging markets and gold on the other.

As Jim Rogers puts it in Barron’s, " is an amateur with no knowledge of markets whose academic work revolved around how nations could avoid depressions by printing more money."

Put the new man under a little pressure and the lifts in his shoes will disappear overnight. Rather than imitate the straight-talking giant, Volcker, he will hunch over and mumble. Yes, dear reader, Alan ‘Bubbles’ Greenspan will be back. But, alas, without the old magic. For now all that liquidity that the maestro pumped into the world market is leaking into consumer prices (which is why central bankers are so eager to mop it up). And adding more liquidity now just makes the situation worse or better, depending on how you look at it. If you are invested in Dow stocks and the dollar, you will suffer.
If you are invested in commodities, gold, oil - and maybe even a few carefully selected emerging markets - you will rejoice.

more...

http://www.capitolhillblue.com/artman/publish/printer_8790.shtml

Military commanders in the field in Iraq admit in private reports to the Pentagon the war "is lost" and that the U.S. military is unable to stem the mounting violence killing 1,000 Iraqi civilians a month.

Even worse, they report the massacre of Iraqi civilians at Haditha is "just the tip of the iceberg" with overstressed, out-of-control Americans soldiers pushed beyond the breaking point both physically and mentally.

"We are in trouble in Iraq," says retired army general Barry McCaffrey. "Our forces can't sustain this pace, and I'm afraid the American people are walking away from this war."

Marine Gen. Peter Pace, chairman of the Joint Chiefs of Staff, has clamped a tight security lid on the increasingly pessimistic reports coming out of field commanders in Iraq, threatening swift action against any military personnel who leak details to the press or public.

more...

this seems to be worth following

VIPs' arrivals marked by a discreet 'B'

Andrew Mayeda and Glen McGregor, The Ottawa Citizen; with files from Citizen News Services
Published: Friday, June 09, 2006

Greeted at the airport by limousine drivers holding single-letter "B" signs, global luminaries such as Henry Kissinger, David Rockefeller and Queen Beatrix of the Netherlands began quietly slipping into Ottawa yesterday for the annual gathering of the ultra-secretive Bilderberg Group.

Over the next three days at the Brookstreet Hotel in Kanata, they and other prominent political and business leaders from North America and Europe are expected to discuss issues such as the security threat posed by Iran and the direction of oil markets.

Interesting, eh?

market trading.



DUH people did you finally get the fucking memo that this comeback was a farse.

Reality is a tough thing ;)

now all we need is some blather from our providers

Thanks everyone for all of the hard work/excellent information that you provide on a daily basis.

If we ever meet I surely owe you all a six pack or something, you all are a brick in my fondation of trading.

Peace!

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2006-06-09T205203Z_01_N09191404_RTRIDST_0_ECONOMY-GLOBAL-FACTBOX.XML
Fri Jun 9, 2006 4:52pm ET

June 9 (Reuters) - Global economic growth, which accelerated sharply through the first quarter of 2006, looks to have a hit a speed bump last month, a series of leading indicators show.

While aggregate world growth remains near the historic peaks of the last three decades, concern about disappearing spare capacity, commodity-driven inflation and rising borrowing rates have seen financial markets hiccup.

May business surveys, which in April flagged the fastest expansion in the global private sector economy in two years, registered a U.S.-led cooling last month.

Even though these readings remain consistent with 5 percent world growth, there are growing concerns a natural cyclical downswing is now under way just as central banks start to act tough on inflation signals with higher interest rates.

World stock market indexes have dropped some 9 percent from six-year highs over the past month as a result.

Industrial metals prices, which had almost doubled over the previous year, retreated some 11 percent in the past month.

Long-term government borrowing rates have also retreated and a widespread retreat from risky assets has seen interest rate premiums on emerging market government bonds rise.

<snip>

- Surveys of 10,000 companies in 20 countries show private sector business growth slowed in May from 2-year highs set the previous month, with a cooling United States outweighing a further acceleration in euro-zone manufacturing and service sectors to new five-year highs. JPMorgan's global output index fell 1.5 points to 58.8. Readings over 50 show expansion. Economists say this is still consistent with 5 percent annual world GDP growth.

<snip>

-- The International Monetary Fund in April boosted its forecast for global growth this year to 4.9 percent from the 4.3 percent it forecast last September. It also revised up its 2007 forecast to 4.7 percent from 4.3 percent previously. Recent world growth rates peaked at 5.1 percent in 2004, but a 4.9 percent showing in 2006 would still be far above the 3.9 percent 10-year average.

-- Goldman Sachs said its Global Leading Indicator for May rose to show 4.2 percent year-on-year growth, up from 3.6 percent in April and 3.1 percent in March. Its monthly momentum gauge also rose to 0.36 percent from 0.34 percent in March and matching February's two-year high of 0.36 percent.

-- The OECD's lead economic indicator for the 30-nation bloc rose to 110.1 in April, the highest in the current cycle, from 109.6 in March and was up from a low of 105.4 in April 2005. A closely watched six-month rate of change rose to 4.9 percent, also the highest in the current cycle, from 4.7 percent in March and April 2005's 0.3 percent.

/more data...

Dow 10,891.92 -46.90 (-0.43%)
Nasdaq 2,135.06 -10.26 (-0.48%)
S&P 500 1,252.30 -5.63 (-0.45%)
10-yr Bond 49.81 -0.11 (-0.22%)
30-yr Bond 50.33 -0.25 (-0.49%)
NYSE Volume 2,213,998,000
Nasdaq Volume 1,809,594,000

4:20 pm : With foreign markets rallying on Friday in the wake of the U.S. stock market making a striking recovery run from its lows on Thursday, and Texas Instruments (TXN) providing a reassuring mid-quarter update, hopes were high entering today's session that the bullish momentum would continue. It didn't.

Once again, concerns about rising interest rates and their impact on economic growth took the life out of the market, which ended the session close to its intra-day low. The lack of follow-through buying interest was surprising in some respects, but overall, it made sense given that there is typically a show of reserve ahead of a weekend and knowing that next week will be chock full of some telling economic data.

In particular, reports on inflation at the producer and consumer levels that will be released on Tuesday and Wednesday, respectively, will be the focal points as they will drive expectations for Fed policy. Retail sales and industrial production data will also be closely-watched given the insight they will provide on consumer and business activity.

As for today, there really wasn't much upon which to focus from a news standpoint. The Texas Instruments news was the biggest item, but in a reflection of the market's belief that earnings prospects will suffer in the back half of the year because of rising interest rates, neither TXN nor the semiconductor index were able to hold early gains forged on the basis of the former company's encouraging guidance for the June quarter.

In turn, the concerns about economic growth were evident in today's sector performance, as the biggest laggards were those that are considered to be among the most economically sensitive (i.e. Energy Services, Industrial and Materials). Conversely, it was the defensive-oriented Utilities sector (+0.67%) that stood out as the only economic sector to post a gain.

The Trade Deficit for April widened to $63.4 billion from $61.9 billion in March. That was better than the $65 billion consensus estimate, but it didn't have any real impact on equity trading. The Treasury market finished with modest gains; meanwhile, the dollar bounced around in the wake of the report before ending the day little changed.

Stocks also bounced around, spending time on either side of the unchanged mark as neither buyers nor sellers showed a great deal of conviction. Sellers, however, stepped up their efforts in the closing stages of trading and the indices ended a tumultuous week on a lackluster note.

Breadth favored declining issues at both the NYSE and Nasdaq and volume was moderate with 1.60 billion shares traded at the NYSE and 1.78 billion shares on the Nasdaq.DJ30 -46.90 DJUA +0.63% NASDAQ -10.26 NQ100 -0.68% R2K -0.73% SOX -0.58% SP400 -0.19% SP500 -5.63 NASDAQ Dec/Adv/Vol 1768/1234/1.78 bln NYSE Dec/Adv/Vol 1744/1483/1.60 bln



Have a great weekend! :hi: